Yext Says It Will Be Profitable By 2015 — Here’s How

When Yext raised $27 million in venture capital two years ago, the size of the round stunned many in the industry. For years, local was considered a backwater in the technology sector, and the idea that a startup built around local search and listings could draw a quarter billion dollar valuation garnered admiration, envy, and skepticism.

But over the past 23 months, the New York-based startup has silenced critics, turning the listing-synching concept, which began as a side-project, into a cash cow that helped the company generate over $34 million in revenue last year, according to Howard Lerman, Yext’s outspoken chief executive. In an interview last week, Lerman told Street Fight that the company expects to generate $56 million in 2014, and hit $85 million — and profitability — by 2015.

To fuel that growth, the company is leaning on a suite of new products and features, each of which are built on top of the local content, which brands continue to funnel into its listings-synch product. But Yext’s coup-de-grace was the realization that the local marketing sector had reached a tipping point where the need for simplicity and efficiency began to outweigh the desire for invention and newness.

Understanding Yext’s core listings business
The financial projections pitched by Lerman are undoubtedly ambitious. The local search industry has shifted away from the listings model after a series of algorithmic changes by Google, which favor branded content and a few key publishers (e.g. Yelp) over the majority of poor-quality listings sites. For businesses, that means a fewer sites that need updating, and subsequently, a slight decrease in the value of a network like Yext, which feeds off fragmentation.

There’s also the problem of competition. The company’s success drew admirers, and over the past few years, a number of well-capitalized firms have snapped up its early competitors. A few days after Yext raised its round in 2012, the email marketing firm Constant Contact bought SinglePlatform, its largest competitor. Meanwhile last year a rejuvenated GoDaddy snapped up the somewhat smaller Locu.

For the most part, each of these companies sought to solve a one crucial problem with the local data industry. Traditionally, publishers, and the data firms that supply local data, gather information from a number of sources — everything from scraping websites to direct entries from business owners — then merge and weight each data source, programmatically deciding which data are most likely to be correct for each field. What’s left is a system in which a business’ listing is one of a number of signals which publishers and data firms use to decide what’s the right name, phone number, address for a given location.

Yext’s big innovation, and what separates it from its competitors, was the deal it struck with publishers. When publishers work with Yext, they agree to use the data created by Yext clients above any other source. And more often than not, it means a sizable check written to the publishers from the startup. But it also means a confirmation to clients that they now have direct access to the pages of these publishers.

Airplanes and Buggies
Towards the end of last year, Yext shifted its marketing messaging, and began to position its core listings service as one part of a wider geomarketing cloud, which aimed to serve as a “clearinghouse” for a brand’s local content.

The cloud consists of two key products: the company’s content management system, which allows brands to manage, add, and edit information about locations through a single portal, and an analytics product that allows users to measure activity.

To a certain extent, the listings product was both the mechanism by which the company created the cloud, and the cloud’s first application. In May, the company expanded its service to Facebook and earlier this year, the company began to roll out its new landing pages product. Both applications draw content from the existing information which a brand has already entered for the core listing syndication service.

From a product perspective, social management or the landing pages are nothing new. But what’s innovative are the workflows that feed into these services, and the ability to automate the decisioning across a number of different channels all from a single resource.

“The industry in general tends to get excited about possibilities but then they get way ahead of what’s possible, and then they forget to solve the low hanging fruit,” Lerman said last week. “Listings aren’t new. They were developed back in the 1800’s. But so was transportation — we’re just building airplanes while everyone else is using horse-and-buggies.”